For example, there are at least four switchel beverage companies selling actively right now. Two are externally funded, and there will certainly be a shake-out.
In these hyper-competitive spaces, external funding is often necessary (or desired) to aggressively grow a great idea before followers do the same.
And aggressive growth requires special kind of strategic planning, one that is built on proven best practices. Below are the five principles needed to build such an aggressive plan. When you master these components, you can spend your investors’ money more wisely and efficiently. They also work for self-funded ventures that are already profitable.
The five components of any strategic plan for accelerated growth are:
1 - Set an aggressive growth goal
This may sound obvious, but I bring it up because we can define ‘aggressive growth’ in a way that is guaranteed to gain you attention from retail buyers, distributors and, most importantly, investors….if you pull it off.
In general, 100%+ year-over-year net sales growth once you pass $250,000 in annual net sales will trigger a near spontaneous reaction in the trade first and a little later among investors looking for their next bet (angels first, then the big guys).
If you have wondered how some start-ups attract capital before this growth record has been established, it is often because the management team has achieved this level of growth before at prior companies. The key is to attain this level of growth without simply ‘purchasing’ distribution in large amounts. The latter rarely creates sustainably high growth.
2 - Think like a marketer first, operator second
This is where developing a consumer-centric strategy is imperative. Everything in a fast growing business has to be focused on intentionally impressing a well-thought out consumer audience predisposed to buy your product…a lot. This is how world class consumer marketers think.
By the time you hit $250,000 in net sales, you should have a decent sense of your heavy, passionate buyers. If not, get out there and find out who they are. This does not require expensive research. Make yourself available online, at events, in-store and listen.
Aggressive growth companies must think like a marketer first, operator second. This does not mean you neglect your bottom-line. It means that, as you think through strategic options, you sort first for the ones that will please your preferred target consumer and then filter for bottom-line health among those strategic options.
Entrepreneurs who manage their start-ups for cost primarily almost never grow at high rates and many of them fail. This is as true for large public companies as it is for entrepreneurs. Top-line concerns drive the strategic plan. The risk is much higher, but the reward usually much, much greater.
3 - Gain an objective, competitive understanding of your offering
When you’re looking for accelerated growth, it’s imperative you understand where you fit in the trend cycle of your core merchandising category. Who are your competitors? Among consumers who desire innovation in the category, how innovative are you compared to your competitors? What are your competitors’ go-to-market strategies? Are your competitors well-funded or not?
Retail buyers often have some of this knowledge but are not paid to write your strategic plan or to help you figure it out. Although a good broker can sometimes help, remember, brokers are not exactly unbiased strategic advisors. So, you need to do your homework and/or get category experts involved to help you. I don’t recommend doing this alone.
Here’s one way to understand your competitive reality on your own:
- What attributes does your product have that are both rare in your core category AND connected to highly popular consumer benefits?
- Are the attributes intuitive to shoppers (i.e. using only on-pack information or light word-of-mouth?)
- Are you the first to be prepared to take these attributes nationwide?
- What is the in-market performance of your top competitors and category leaders? (SPINS and Nielsen data can help a lot; it’s worth the expense if you’re this ambitious)
4 - Focus on one product form/category
This oddly under-discussed truth is really non-negotiable if you want triple digit top-line growth that lasts for years. Why? Because consumers want entrepreneurs to be experts in their categories. This is what attracts people to trade up to new, premium priced alternatives.
Tight product focus in the retail environment helps establish the foundational credibility for believable expertise in consumers’ eyes. If you have eight products in eight different parts of the store, you will potentially attract eight different consumer niches who can’t be properly activated by a powerful, unified marketing campaign. This is, in part, why Frito-Lay has eight different brands for its salty snacks portfolio. Each one ties to an iconic sensory experience which has become irrationally, but profitably, differentiated in the consumers’ eyes.
Recently conducted data science from The Hartman Group Inc. has also established that single category, early stage natural/organic brands sustain significantly higher, top-line CAGRs for much longer after $3-5m in retail sales.
5 - Adjust your investments in the 4Ps based on how difficult your competitive situation makes the attainment of your growth goals
This is where all the strategic planning complexity now enters into the picture. While there is no cookie-cutter solution for accelerating growth, there are patterns one can learn from, patterns based on successful growth case studies since the recession.
- Intuitive, better-for-you first-movers (e.g. Skinny Pop): These are some of the fastest growers out there. They rely on very simple innovations, excellent trade placement and little to no consumer marketing. This requires world class sales teams and buyer relationships to pull offer before existing players copy you. The more intuitive your offering, the more it does not require a lot of consumer outreach. Word of mouth will carry you without funding a great deal of explicit consumer marketing (though you may want to fund it anyway).
- Less intuitive, performance, first-movers (e.g. Essentia water): You must spend a lot on consumer marketing, by having lots of intimate conversations. Trade placement without this may simply not perform well or only capture a small niche in each store you arrive at. Underfund marketing at the risk of not meeting your aggressive top-line sales goals.
- Intuitive, ahead-of-the-curve nutrition (e.g. Siggi’s yogurt): Let word-of-mouth carry you until you hit an inflection point in the trend cycle of your category. Consumer marketing, if done well, can actually accelerate the adoption of the trend, with you as the leader. But you don’t want to push either it or distribution too quickly. However, if you do want to nudge the trend ahead of its time, you have to be prepared to fund explosive adoption in your category. In high buy rate categories like yogurt, this is a terrifying amount of unit production, so a slower build will allow you to grow smartly AND maintain product quality.
These are a just a few of the permutations where the 4Ps of marketing require very different ratios of investment and pacing to maximize growth without over-distributing into a demand desert. Those who seek rapid growth and/or scale often make the latter mistake when outside funding becomes ‘too abundant.’
Good luck out there!
James F. Richardson, Ph.D. – formerly senior VP of knowledge and innovation at Hartman Group - is a growth strategist for emerging food and beverage brands and founder of Premium Growth Solutions, a consultancy for entrepreneurs and investment firms focused on the premium end of retail food and beverage.